As the Senate and the House of Representatives convened for emergency sessions, hopes of a deal in the upper house appeared to be fading as Harry Reid, the Democrat leader, said the parties remained “apart on some pretty big issues”.

The Senate is due to convene at 11am Washington time (1600 GMT) to continue discussions.

"Democrat and Republican lawmakers will meet again today to present a potential deal to Senate lawmakers but time is running out and hopes are rapidly receding for a deal later today," said Ishaq Siddiqi, market strategist at ETX Capital.

"Traders are taking no chances on the final trading day of the year as such, removing cash off the table in the likely event that the fiscal cliff will be triggered tonight."